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OSS

Chinese Firms Create OSS Giant

Two of China's leading providers of telecom software and systems integration services are merging to create a company with more than 8,000 staff and annual revenues of more than $400 million, they announced over the weekend.

AsiaInfo Inc. (Nasdaq: ASIA) and Linkage Technologies International Holdings Ltd. (Website in Chinese only) are combining to form AsiaInfo-Linkage Inc. [Ed: Inspired and snappy!]

Linkage's owners will receive 26.8 million new AsiaInfo shares and $60 million in cash, after which they will hold a 35.8 percent stake in the new company. AsiaInfo's current shareholders will own the remaining 64.2 percent. Based on AsiaInfo's closing price of $25.10 on Friday, the deal is worth $733 million.

The news was well received by investors, as AsiaInfo's share price leaped by $5.02, or 20 percent, to $30.12 today.

The new company will be one of the world's largest developers of operations support and business support software (OSS and BSS), despite generating substantially all of its revenues in one market, China, where both AsiaInfo and Linkage have major deals with all three of the country's major carriers, China Mobile Ltd. (NYSE: CHL), China Telecom Corp. Ltd. (NYSE: CHA), and China Unicom Ltd. (NYSE: CHU). (See AsiaInfo Upgrades BOSS and AsiaInfo Wins Smart Biz.)

Other significant players in the Chinese OSS/BSS sector include Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), while the likes of Amdocs Ltd. (NYSE: DOX) and Oracle Corp. (Nasdaq: ORCL) have also made inroads into the market. (See Huawei, Aircom Team for OSS, China Unicom Uses Huawei OSS, ZTE Secures $15B, Highlights R&D, Amdocs Wins in China, Oracle Touts OSS Success, Huawei Goes Indie for OSS, and ZTE Shows Off Its OSS.)

The new company, though, has international aspirations. "We are creating the pre-eminent software solutions provider in China's telecommunications industry... In addition to growing our business domestically, the merged company will explore new revenue drivers by looking abroad," stated AsiaInfo's CEO Steve Zhang, who will also be CEO of the new venture, in the company's official merger statement.

Seeking new business abroad will bring it into greater competitive contact with the telecom software sector's other big hitters, such as CA Technologies (Nasdaq: CA), Convergys Corp. (NYSE: CVG), HP Inc. (NYSE: HPQ), IBM Corp. (NYSE: IBM), Tech Mahindra Ltd. , Telcordia Technologies Inc. , and Wipro Ltd. (NYSE: WIT), as well as Amdocs and Oracle. (See Telcordia: Still a $700M+ Player, CA Nabs NetQoS for $200M, Convergys Upgrades OSS, HP Creates New Telecom Unit, IBM Targets Telcos' Apps Dev Needs, Telstra Extends IBM Deal, Tech Mahindra Targets Major APAC Growth, Wipro, Oracle Team on OSS, and Amdocs Rallies, Fills SDP Hole .)

Telecom hardware vendors such as Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Huawei, and Nokia Networks are also major telecom software players. (See AlcaLu Shows Off Its Apps Abs, Singapore Slings for AlcaLu, Huawei, Huawei Unveils New OSS, and Nokia Siemens Bags OSS Smarts .)

So how big will the new company be?

If the two companies joined forces now they would have 8,000 staff and be on course to generate full-year revenues of more than $400 million and significant profits.

AsiaInfo generated $173 million in revenues and $22 million in net income during the first nine months of this year, and expects to rake in a further $70 million-plus in sales during the fourth quarter to take its 2009 revenues to at least $243 million.

The majority of the company's revenues (about 83 percent during the third quarter) comes from its telecom software and services business, with the remaining coming from IT security products and services.

Linkage, which in mid-November filed papers with the Securities and Exchange Commission (SEC) for a $175 million IPO of American Depositary Shares on the New York Stock Exchange (NYSE) , generated $66.6 million in sales and net income of $15.1 million during the first six months of this year, and is on course for a full year's revenues of around $160 million.

Linkage says it develops software solutions for the telecom and other vertical sectors, and "provides outsourcing for application development, maintenance, and reengineering, as well as testing" for all sorts of major Chinese enterprises. It says it has "helped major organizations to implement tax systems, broadband networks, and finance networks."

The merger is set to be completed in March of April 2010.

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 3:51:32 PM
re: Chinese Firms Create OSS Giant This is how Huawei and ZTE started, by building a business in China and then looking to expand abroad.




Maybe AsiaInfo-Linkage will be the Huawei of the OSS world - and, if we're lucky, maybe the company will find a new name, otherwise we'll have to call it AsiaLink, or some such.

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